What is Title Insurance? ~ The Military Move

Title insurance is a type of insurance policy that provides protection to property owners and lenders against financial losses related to covered defects or issues with the title of a property. The title of a property is the legal evidence of ownership and right to use the property, and it can be affected by various factors that may not be immediately apparent. The title policy helps ensure that the property’s ownership is clear and free from any legal disputes or claims.

Here’s how it works:

1. Title Search: Before issuing a title insurance policy, a thorough title search is conducted by a title company. This search examines public records to determine the history of the property’s ownership and any potential issues with the title, such as unpaid liens, encumbrances, or claims against the property.

2. Policy Issuance: After the title search is completed, the title insurance company issues a title commitment, followed by the title insurance policy after closing. There are two types of title insurance policies: owner’s title insurance and lender’s title insurance.

– Owner’s Title Insurance: This policy protects the property owner, and their heirs, against financial losses if any covered title issues arise in the future. It lasts for as long as the owner owns the property.

– Lender’s Title Insurance: This policy protects the mortgage lender’s interests in the property. It is usually required by lenders when you take out a mortgage loan to purchase a property or refinance it.

3. Protection: If a covered title issue arises after the property purchase, the policy covers the legal fees and costs associated with resolving the problem. If the property owner or lender suffers a financial loss due to a valid claim against the title, the insurance policy will compensate them, up to the policy’s remaining balance. In the event of a problem, the title insurer will, at its own expense, defend the title and pay losses up to the policy amount to satisfy any valid claim.

Common title issues that it can protect against include:

– Forgery or Fraud: If someone forges a signature on a property deed or engages in fraudulent activity related to the property’s ownership.

– Unpaid Liens: If there are unpaid debts or liens on the property that weren’t discovered during the title search.

– Errors in Public Records: If there are mistakes or errors in the public records related to the property.

– Missing Heirs or Undisclosed Owners: If there are unknown heirs or undisclosed co-owners who claim an interest in the property.

Title insurance is typically a one-time premium paid at the time of the property purchase and provides ongoing protection as long as you or your lender have an interest in the property. It’s an important safeguard to ensure that your investment in real estate is protected from unforeseen title-related issues that could threaten your ownership or the lender’s security interest in the property.

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